Driving California ForwardPublic Health and Societal Economic Benefits of California’s AB 32 Transportation Fuel Policies

LCFS AND CAP-AND-TRADE REGULATIONS

Environmental Defense Fund / American Lung Association in California / Tetra Tech

Driving California ForwardPublic Health and Societal Economic Benefits of California’s AB 32 Transportation Fuel Policies

LCFS AND CAP-AND-TRADE REGULATIONS

Lead authors

Timothy O’Connor, Katherine Hsia-Kiung, Larissa KoehlerEnvironmental Defense Fund

Bonnie Holmes-Gen, William BarrettAmerican Lung Association in California

Michael Chan, Karen LawTetra Tech

with modeling by

Environmental Defense FundEnvironmental Defense Fund is dedicated to protecting the environmental rights of all people,

including the right to clean air, clean water, healthy food and flourishing ecosystems. Guided

by science, we work to create practical solutions that win lasting political, economic and social

support because they are nonpartisan, cost-effective and fair.

American Lung Association in CaliforniaThe American Lung Association in California saves lives and improves the health of Californians

and their lungs. Through research, education and advocacy, we fight to reduce smoking,

keep the air we breathe clean, prevent and treat lung diseases such as asthma and chronic

obstructive pulmonary disease, and eliminate lung cancer.

Cover photo: Thinkstock

©2014 Environmental Defense Fund

The complete report is available online at edf.org/ and lung.org/california.

iiiEnvironmental Defense Fund / American Lung Association in California

Table of contents

Executive summary iv

Background and overview 1

Analysis assumptions 7

Methodology 11

Model results and analysis 15

Conclusion 24

Appendices 25

Notes 32

DRIVING CALIFORNIA FORWARD / Executive summary iv

Executive summaryThe transportation sector is the largest source of pollution in California, contributing close to

70% of smog-forming gases and 40% of the state’s climate change pollution every year. Conse-

quently, the current transportation system is responsible for a significant portion of the

adverse health impacts that citizens suffer from, in addition to causing energy vulnerability

that threatens economic stability and contributing to climate change that threatens the future

of our state and planet.

California can reduce these severe negative impacts by cutting the overall system’s rate

of pollution that endangers public health (e.g. NOx, SOx, and PM2.5), growing the volume of

domestically produced clean fuels, and cutting carbon pollution from fuels. Among the many

policies being pursued to drive this transformation are the state’s AB 32 Low Carbon Fuel

Standard (LCFS) and cap-and-trade regulation (C&T).

This analysis calculates the economic benefit of the LCFS and C&T by evaluating the

societal benefits of full implementation in 2020 and 2025, which include 1) avoided public

health costs and incidents of illness, 2) avoided fossil fuel dependence costs, and 3) avoided

climate change-related costs (see Figure E-1 below for the proportion of the total societal

economic benefit attributed to these three components). These benefits are com pared to a

baseline that does not factor in those policies to show that by 2025, the LCFS and C&T will

incentivize the shift to a cleaner transportation fleet that will save the state and its citizens money.

FIGURE E-1

Breakdown of net societal economic benefit by component (2025)

Health-related benefit36%

Energy security benefit30%

GHG reduction benefit34%

vEnvironmental Defense Fund / American Lung Association in California

Combined benefits of LCFS and C&T fuel regulationsModeling conducted for this report shows that without the LCFS and C&T, the California trans-

porta tion system is expected to result in cumulative societal economic impacts of $274 billion

by 2020 and $387 billion by 2025. The transition to a cleaner and more diverse vehicle fleet will

require investments in alternative fuel production and infrastructure. According to modeling

conducted in this analysis, the LCFS and C&T regulations will result in cumulative benefits

from avoided health, energy insecurity, and climate change costs of $10.4 billion by 2020

and $23.1 billion by 2025. The model used in this report includes benefits from both the

light-duty (e.g. passenger cars and light trucks) and heavy-duty (e.g. on- and off-road

trucks and buses) sectors. Each of the three components studied in this report are described

in further detail below.

Health effects of the current transportation system and benefits of new fuel regulationsAmong the many documented impacts of air pollution generated from cars and trucks is

increased risk of asthma attacks, heart attacks, cardiovascular disease, respiratory ailments,

and cancer, as well as shortened lifespan. This pollution is particularly detrimental to

more vulnerable populations, such as infants, children, and the elderly; low-income and

disadvantaged individuals who are already exposed to increased amounts of pollutants;

and people with pre-existing lung and heart diseases. All told, air pollution has been estimated

by the California Air Resources Board to cause 9,200 deaths in California per year,1 with more

recent research indi cating that approximately 21,000 deaths per year in California are caused

by roadway pollution.2

A 2011 American Lung Association in California report entitled The Road to Clean Air,3 which

this report builds on, demonstrates that a reduction in transportation pollution from increasing

cleaner and more efficient passenger vehicles will improve the quality of the air and reduce the

incidence of observed health impacts. This transition will not only directly improve health, but

also create billions of dollars in annual economic benefits in the form of fewer missed work days

and fewer expensive hospital visits.4

Pursuant to the analysis presented in this report, the increased use of cleaner fuels through

implementation of the LCFS and C&T program will substantially improve air quality and reduce

climate pollution generated in California leading up to 2020 and beyond. By 2025, when a

significant part of the vehicle and fuel mix will have been influenced by the LCFS and C&T,

communities can expect a cumulative benefit from the LCFS and C&T that includes:

• Savings of $8.3 billion in pollution-related health costs

• Prevention of 600 heart attacks and 880 premature deaths caused by air pollution

• Prevention of 38,000 asthma attacks and almost 75,000 lost work days

• Reduction of criteria pollutant emissions by almost 180,000 tons

Energy security benefits of transportation fuel regulationsCalifornia’s reliance on imported oil for transportation energy is documented to be a major

factor that contributes to the state’s economic vulnerability.5 According to research on the

U.S. economy-wide impact of energy dependence on imported oil, the cumulative cost was

more than $2 trillion from 2007 to 2011.6

By creating a regulatory signal to diversify the state’s fuel mix with a portfolio of lower

carbon fuels, many of which are produced domestically in California or in other parts of the

U.S., the LCFS and C&T will decrease costs associated with energy dependence (including

associated supply vulner ability costs) on imported oil. By 2025, petroleum use and import

vi DRIVING CALIFORNIA FORWARD / Executive summary

reductions that lead to greater energy independence will produce significant cumulative fiscal

and societal benefits, including:

• Savings of approximately $6.9 billion from increased energy independence

• Reduced consumption of gasoline by 21.4 billion gallons

• Reduced consumption of diesel by 11.8 billion gallons

Climate change-related benefits (known as the “social cost of carbon”) of transportation fuel regulationsGlobal climate change is linked to significant economic costs because of its causal connection

to disruptive impacts such as extreme weather events, higher temperatures, changing

precipitation patterns, and sea level rise. The social cost of carbon therefore takes into

account climate change damages like changes in net agricultural productivity, human

health, and property damages from increased flood risk, as well as drought and higher

than normal temperatures.

By decreasing greenhouse gas pollution through the LCFS and C&T, California will con-

tribute to reduced social costs associated with climate change. By 2025, regulating transporta-

tion fuels through the LCFS and C&T is expected to produce significant cumulative benefits,

including:

• Savings of $7.9 billion in social cost of carbon damages

• Reduction of CO2 equivalent emissions by almost 165 million metric tons

Background and overview

2 DRIVING CALIFORNIA FORWARD / Background and overview

California is in the process of transitioning the statewide economy into one that is more

diverse, more resilient to economic downturns, and better for the environment. This transition

necessarily includes a shift in the transportation sector away from over-reliance on a single

fuel source, most of which is imported, and towards a system that is based on a mix of lower

emitting, domestically produced, more sustainable fuels. This process also includes a shift

towards more highly efficient modes of transportation, as well as land use and transportation

planning initiatives that promote healthier alternatives to driving.

Over the next decade, two landmark policy drivers—California’s AB 32 Low Carbon Fuel

Standard (LCFS) and cap-and-trade regulation (C&T)—will be at the heart of the continued

over haul of the transportation system. As shown by this and other analyses,7 these policies

reduce harmful air pollution and cut overall fossil fuel use. Furthermore, compliance

with these regu lations will result in investments that will save billions of dollars over

the next decade.

In this report, a transportation fleet modeling platform was developed to better understand

the impact of the LCFS and C&T regulations between 2010 and 2025. The model was first

run to predict what the statewide vehicle fleet would be composed of assuming the LCFS

and C&T regulations were not in place (the “no-regulation scenario”). The model was then

used to predict what the statewide vehicle fleet would look like assuming full compliance

with the LCFS and C&T regulations as planned (the “deployment scenario”). The two modeling

outputs were then compared to calculate the societal economic benefit of the transition

in the statewide vehicle fleet associated with the regulations. The societal economic

benefit aggregates impacts from the following three categories: 1) avoided air pollution-

related public health impacts, 2) avoided fossil fuel dependence impacts, and 3) avoided

climate change impacts.

Costs of maintaining a transportation system in the no-regulation scenarioCalifornia is home to more than 30 million vehicles, with drivers consuming about 17 billion

gallons of gasoline and diesel each year and approximately 3,000 trillion Btus of energy. Of all

fifty states, California ranks first in terms of the amount of energy used for transportation, as

shown in Table 1-1. This high rate of consumption causes drivers to spend between $60 and

$80 billion annually with gasoline prices between $3 and $4 per gallon.

Reliance on conventional motor vehicles that run on the combustion of fossil fuels comes at

a high economic and public health cost. The health costs of air pollution are real—Californians

are suffering from missed work days, asthma attacks, respiratory and cardiac hospitalizations, and

premature deaths.8 The reason for this is that California’s air pollution remains among the worst

in the country, with 30 million Californians, or roughly 80% of the state’s population, living in

Societal economic benefit is

the main metric of this report and

refers to the total economic benefit

that will come from imple menta-

tion of the LCFS and C&T in

California. This number is a sum

of three components: 1) avoided

public health costs, 2) avoided

fossil fuel dependence costs, and

3) avoided climate change-related

costs.

TABLE 1-1

Transportation sector energy use (2011)State Ranking Btu/year (in trillions)

California 1 3000

Texas 2 2818

Florida 3 1538

New York 4 1015

Illinois 5 979

Source: U.S. Energy Information Administration9

All results of the model used in this report are calculated in 2013 U.S. dollars.

3Environmental Defense Fund / American Lung Association in California

counties with unhealthy air.10 Of great concern are particulate matter and ground-level ozone.

Ozone is formed when nitrogen oxide, hydrocarbons, or carbon monoxide from tail pipes or

other polluting sources react with sunlight. Motor vehicles are among the biggest con tributors

of these pollutants.11 Particle pollution is made up of microscopic specks of soot, metals, acids,

dirt, pollen, molds, and aerosols that are tiny enough to inhale. Key sources of particle pollution

in California include cars, diesel engines in trucks, buses, and freight vehicles, equipment, and

other combustion sources.

Pollution is especially acute in the many California counties that fail to meet federal health-

based air quality standards for ozone and PM2.5, including most urbanized areas in California,

especially the San Joaquin Valley and Southern California regions. A map of these regions is

displayed in Figure 1-1.

Exposure to dirty air can cause or worsen a variety of severe health problems,

including respiratory diseases like asthma, pulmonary inflammation, and cardiovascular

disease, as well as increased risk of heart attack, increased infant mortality, and increased

cancer risk. Vulnerable popu lations such as children and infants, the elderly, anyone with

existing respira tory and heart illnesses, and disadvantaged communities who are already

FIGURE 1-1

Air quality by countyCalifornia 8-hour ozone nonattainment areas (2008 standard)

California Inyo

Kern

San Bernardino

Fresno

Riverside

Tulare

Siskiyou

Lassen

Modoc

Imperial

Mono

ShastaTrinity

San Diego

Tehama

Monterey

Plumas

Los Angeles

Butte

Madera

Lake

Merced

Kings

Yolo

Placer

Ventura

Tuolumne

Glenn

El Dorado

Santa Barbara

Sierra

Humboldt

Mendocino

San Luis Obispo

Sonoma

Colusa

Mariposa

Napa

Stanislaus

Solano

San Benito

NevadaYuba

Alpine

San Joaquin

Santa Clara

Del Norte

Orange

Calaveras

Sutter

Marin

Alameda

SacramentoAmador

San Mateo

Santa Cruz

Los Angeles

Santa Barbara

Los Angeles

Ventura

Santa BarbaraVentura

San Francisco

San Francisco Bay Area, CA

San Joaquin Valley, CA

Los Angeles South Coast Air Basin, CA

San Diego County, CA

Imperial County., CA

Los Angeles - San Bernardino Coun ties.(Western Mojave Desert), CA

Kern County. (Eastern Kern), CA

Chico (Butte County), CA

Nevada County (Western Part), CA

Sacramento Metro, CA

Mariposa County, CA

Riverside County. (Coachella Valley), CA

Ventura County., CA

San Luis Obispo (Eastern San Luis Obispo), CA

8-hour Ozone Nonattainment Areas

8-hour Ozone Nonattainment ClassificationExtremeSevere 15SeriousModerateMarginal

0 40 80 120 160

Miles

Calaveras County, CA

Pechanga Band of Luiseno Mission Indians of the Pechanga Reservation

Morongo Band of Mission Indians

Source: Environmental Protection Agency12

4 DRIVING CALIFORNIA FORWARD / Background and overview

TABLE 1-2

Health impacts of air pollution from motor vehiclesTailpipe pollutant What is it? What does it do?

Nitrogen oxides (NOx)

Generated from fuel combustion. Harm ful gas when emitted. Reacts with volatile organic com pounds (VOCs), carbon monoxide (CO), and sun light to create ozone smog. Forms PM2.5 in the atmosphere.

NOx triggers asthma and increases the risk of infections. NOx also recognized as a key marker of near-roadway pollution. Ozone smog poses a variety of health threats, including premature death, respiratory harm (e.g. worsened asthma), and is linked to cardiovascular harm.

Sulfur oxides (SOx)

Generated from combustion of fuel con tain-ing sulfur. Harmful gas when emitted. Forms PM2.5 in the atmosphere.

SOx exacerbates asthma and increases risk of hospitalization. See below for effects of PM2.5.

Particulate matter (PM2.5, PM10)

Tiny airborne liquid and solid particles gener ated by fuel combustion and by friction on tires, brakes, and road dust. Smaller than 2.5 microns in diameter and 10 microns in diameter, respectively.

Causes premature death, cardiovascular harm (e.g. heart attacks, strokes, heart disease), increased risk of respiratory harm (e.g. worsened asthma, worsened COPD), increased lung cancer.

Volatile organic compounds (VOCs)

Highly reactive gases generated from fuel combustion. Include benzene, formaldeyde, and other carcinogens. Reacts with NOx, carbon monoxide (CO), and sunlight to create ozone smog.

VOCs can cause a variety of health problems including respiratory harm and cancer. See above for effects of ozone smog.

Carbon monoxide (CO)

Generated from fuel combustion. Reacts with NOx , VOCs, and sunlight to create ozone smog.

Reduces oxygen flow in bloodstream. See above for effects of ozone smog.

Source: American Lung Association in California, American Lung Association, Health Effects Institute, U.S. Environmental Protection Agency16

Near-roadway pollution hazards:

Growing evidence shows pollution

levels near highways or busy

roads are higher than in the

community, and people who live

or work nearby are at increased

risk for respiratory and cardio-

vascular harm.

burdened with degraded air quality are especially at risk. Table 1-2, character izes many of

these impacts.

Furthermore, the current transportation sector contributes almost 40% of California’s

climate change-causing greenhouse gas pollution (see Figure 1-2, page 5). As documented,

climate change adversely affects communities across the state, from farmers in the

Central Valley dealing with drought to coastal communities con front ing sea level rise.

Transportation contributes nearly twice the amount of climate pollution as California’s

industrial sector, and disproportionately impacts environ mental justice communities.13

These communities are made up of predominantly low-income residents who are especially

vulnerable to climate change and other environ mental hazards.14

In addition, California’s dependence on liquid fossil fuels produced from crude oil, over 60%

of which is imported from out-of-state (50% from foreign countries, 12% from Alaska),15 results

in energy insecurity and subjects California’s economy to fluctuations in oil prices and import

volume availability. In 2012, nearly 45% of foreign imports originated from the Middle East,

with Saudi Arabia accounting for the largest portion at 27.2% (see Figure 1-3, page 5), although

increasing volumes of crude oil have started being imported from Canada into California by rail.

Based on modeling analysis conducted for this paper and described in Methodology

(page 11) and Model results and analysis (page 15), the societal economic costs of California’s

trans portation system are divided into three main categories:

1. Cost of the public health impacts from air pollution (NOx, SOx, PM2.5)

2. Cost of energy insecurity from fossil fuel dependency

3. Cost of climate change from greenhouse gas pollution (social cost of carbon)

5Environmental Defense Fund / American Lung Association in California

This report quantifies the combined societal cost associated with these three categories at

approximately $25 billion in 2014.

The modeling conducted for this report also constructs a hypothetical fleet mix that

would result from having no LCFS or C&T regulation in place between present day, 2020,

and 2025. As described in Analysis assumptions (page 7), Methodology (page 11), and

Model results and analysis (page 15) the cumulative costs of maintaining the transportation

system without the LCFS and C&T reach $274 billion by 2020 and $387 billion by 2025 due

to public health impacts, energy insecurity, and greenhouse gas pollution (see Methodology,

page 11, and Appendix D).

FIGURE 1-3

Foreign sources of crude oil imports to California (2012)

Colombia 11.9%

Iraq 18.3%

Ecuador 18.9%

Saudi Arabia 27.2%

Others 2.3%

Angola 5.2%

Canada 5.0%

Brazil 3.5%

Russia 3.3%

Kuwait 1.6%Peru 0.9%Venezuela 0.8%Oman 0.6%Algeria 0.5%

Source: California Energy Commission, Energy Almanac18

FIGURE 1-2

California greenhouse gas inventory by sector (2012)

Industrial 22%

Transportation 37%

Commercial 5%

Residential 7%

Agricultural and forestry 8%

Electricity generation (imports) 10%

Electricity generation(in-state) 11%

Total gross emissions:459 MMT CO2E

Source: California Air Resources Board17

6 DRIVING CALIFORNIA FORWARD / Background and overview

Benefits of transitioning the California transportation system through the LCFS and C&TCalifornia vehicle and fuel policies are creating durable market signals to incentivize the

transformation of the state’s transportation system. These health protective policies are driving

the deployment and availability of new, cleaner fuels and vehicles and will continue to do so in

the future. Based on current and forecasted deployment trends, it is apparent that California’s

fuel market is becoming more diverse and shifting towards more domestically-produced, lower-

carbon fuels that will result in dramatically reduced emissions of traditional air pollutants,

criteria pollutants, and toxic air contaminants.

Aggregate estimates of alternative fuel penetration resulting from implementation of all trans-

portation fuel policies by 2020 range from 11.3–18.8% of the total fuel mix (see Table 1-3). This

amounts to approximately 1.7–2.8 billion gallons of alternative fuel in gasoline gallon equivalents.

As detailed in Analysis assumptions (page 7) and Model results and analysis (page 11), the

benefits of LCFS and C&T implementation include reduced public health impacts, improved

energy security, and reduced greenhouse gas pollution. By comparing a no-regulation scenario

to one which models full implementation of the LCFS and C&T, the combined benefits of these

policies can be determined. As shown through this comparison, the LCFS and C&T will provide

a benefit of almost $2 billion in the year 2020, and cumulative benefits of $10.4 billion by 2020

and $23.1 billion by 2025.

TABLE 1-3

Estimated volumes of future alternative fuel penetration in California

Alternative fuel typeYear 2020

projected volume

Volume of displaced gasoline gallons

in CA in 2020

% of fuel market share of cars and trucks

(gasoline and diesel) in CA in 2020

Natural gas (cars) 95 MM therms sold19 76 million gallons per year 0.50%

Natural gas (trucks)15–35% new

heavy duty trucks20199 million–221 million

gallons per year1.3%–1.5%

Biofuel (ethanol)1.6 billion–2.4

billion gallons211.1–1.6 billion gallons

per year7.2%–10.8%

Biofuel (biodiesel)5%–15% aggregate blend into diesel22

200 million–600 million gallons per year

1.3%–4.0%

Electricity and hydrogen passenger vehicles

500,000–1,000,000 vehicles on the road23

160 million–321 million gallons per year

1.0%–2.0%

Total displaced gallons: 1.7–2.8 billion

Market share of alt. fuels: 11.3%–18.8%

Source: Environmental Defense Fund24

Note: These volumes are taken from current estimates of market share, but increased volumes are expected in some categories, including electricity and hydrogen.

Analysis assumptions

8 DRIVING CALIFORNIA FORWARD / Analysis assumptions

Assessment of the “no-regulation scenario” To change the dynamics of California’s fossil fuel-intensive transportation system, the state and

federal government have, over the years, adopted a series of regulations and initiatives. These

include mandatory car and truck efficiency and mileage standards, in addition to alternative

fuels and vehicle grant programs. Additionally, California has adopted strategies to reduce

the harm caused by vehicle pollution through efforts like truck and bus regulations, SB 375

Sustain able Communities Strategies, and mass transit programs. In this study, the LCFS and

C&T regu lations were considered separately from the suite of other transportation policies

that California has implemented in order to isolate their impacts.

Although these two programs do not currently include provisions for declining targets past

the year 2020, the vehicles and fuels in place to meet the targets in 2020 will remain on the road

post-2020, and will continue to accrue benefits when compared to the no-regulation scenario.

The model used in this study assumes continuation of the LCFS and C&T regulations after 2020

at constant stringency levels after that year. This is a conservative estimation given the executive

order signed by Governor Schwarzenegger setting a 2050 target of 80% reduction cuts below

1990 levels of emission in California. Post-2020 reduction targets for these two programs are

being actively discussed to help the state get closer to achieving this ambitious goal.25

Modeling transportation system impacts without the LCFS or C&T (the “no-regulation

scenario”) was performed by Tetra Tech and analyzes the hypothetical lifecycle emissions from

the projected business-as-usual motor vehicle fleet in 2015, 2020, and 2025 (see Appendix A

for fleet inputs) using two emis sions models. First, upstream “well-to-tank” emissions for both

light- and heavy-duty vehicles were derived with Argonne National Laboratory’s Greenhouse

Gases, Regulated Emissions, and Energy Use in Transportation (GREET) model, using the

carbon intensities of the default fuel pathways for California. These emissions were then

added to the downstream “tank-to-wheel” emissions derived using a modified version of the

California Air Resources Board’s Emissions Factor (EMFAC) model.26,27 From the combined

GREET and EMFAC results, the societal economic impact of the fleet mix was quantified using

the methodology described in the sections below.

Assessment of the LCFS and C&T “deployment scenario”To assess the effect of the implementation of the LCFS and C&T, a vehicle and fuel deployment

scenario was developed based on available literature associated with potential deployment

patterns in California (see Appendix C for fleet inputs). This scenario was then run through both

the GREET model and modified EMFAC model in the same manner as the “no-regulation scenario.”

As described above, the LCFS and C&T regulation create a durable market signal for invest-

ment and innovation within the transportation fuel system. However, since these regulations

work synergistically to incentivize investments and pollution reductions throughout the

California transportation system, the effect of one was determined to be indiscernible from the

effect of the other. Further, neither regulation can incentivize deployment of technology beyond

the capabilities of fuel and vehicle developers. As a result, this analysis modeled the combined

effect of the LCFS and C&T, and the deployment scenario constructed was set at a level which

represents feasible deployment figures discussed in publicly available literature and which

closely resemble compliance with the LCFS regulation.

California Low Carbon Fuel Standard (LCFS)The LCFS is a market-based mechanism directly applied to the transportation fuel mix.

The first-in-the-nation LCFS was established under Executive Order S-1-07 and implemented

pursuant to an early action regulatory effort under California’s AB 32, the Global Warming

Solutions Act of 2006. As written, the LCFS requires a phased reduction in the carbon intensity

of transportation fuels in the state, leading to a 10% reduction by 2020.28 Achieving this target

9Environmental Defense Fund / American Lung Association in California

has been forecasted to result in a reduction of approximately 16 million metric tons (MMT) of

greenhouse gas emissions annually from the transportation sector, thus achieving roughly

10% of the AB 32 reduction goal.29 Fuel producers achieve the standards by reducing the carbon

intensity of the fuel they sell or by purchasing credits from other fuel producers.30 The LCFS

helps to promote the increased use of fuel from cleaner, renewable sources with lower carbon

scores, such as plant-based fuels (biodiesel, advanced ethanol, etc.), natural gas and biogas,

electricity, and hydrogen, to name a few. As alternatives to gas and diesel are incentivized,

California’s vehicle fleet will come to rely more on vehicles powered by these cleaner fuels.

The LCFS is already proving itself effective: according to a University of California, Davis

study, alternative fuels have grown to approximately 6.8% of the fuel mix, displacing more

than a billion gallons of gasoline and diesel.31 This resulted in a reduction in carbon dioxide

emissions equivalent to taking half a million cars off the road.

California cap-and-trade regulation (C&T)Since January 2013, pollution from a range of sources in California has been subject to the C&T

program, a market-based pollution reduction program. During the first phase of the program

from 2013 to 2014, pollution from utilities and other large industrial sources is subject to

$

CREDITS

CRUDE OIL

COMBUSTION

REFINERY

CA

P O

N C

AR

BON IN

TENSITY OF FUELS THAT CAUSE POLLU

TION

EXCESS C02

CA

P O

N C

AR

BON IN

TENSITY OF FUELS THAT CAUSE POLLU

TION

POLLUTIONREDUCTION

CREDITS for sale

ETHANOL

NATURALGAS BIODIESEL

ELECTRIC

RENEWABLEDIESEL

LOW CARBONGASOLINE

SHIPPING

Businesses that sell fuel with carbon intensity ABOVE the cap must buy credits

Businesses that sell fuel with carbon intensity BELOW the cap can sell excess credits

FIGURE 2-1

Operation of California’s Low Carbon Fuel Standard

An LCFS limits the amount of carbon emissions from fuels and allows clean fuel producers to sell their carbon credits to busi nesses that have trouble meeting the carbon intensity requirement.

10 DRIVING CALIFORNIA FORWARD / Analysis assumptions

emission reduction requirements. Beginning in 2015, pollution from the combustion of

transportation fuels in motor vehicles will also be included under the cap. Accordingly, fuel

producers will become responsible for emissions from transportation fuels, creating a new

market signal for investments in lower emitting, less carbon intensive fuels, as well as in

investments that reduce the amount of fuel combusted. Over time, the program will produce

about 20% of the pollution cuts required under AB 32, with the inclusion of transportation fuels

accounting for more than half of the total emissions covered by the program.32

FIGURE 2-2

General operation of California’s cap–and-trade regulation

$

Cap declines over time

CAP ON POLLUTION

Businesses that don’t reduce emissions enough must buy credits

Businesses that reduce emissions more than required can sell excess credits

POLLUTION REDUCTION CREDITS

A cap-and-trade system limits the amount of carbon emissions (the cap) and allows clean technology users to sell their carbon credits to businesses that do not meet their targets (the trade).

Methodology

12 DRIVING CALIFORNIA FORWARD / Methodology

Comparing the costs of the current transportation system to the deployment scenario made possible by the LCFS and C&TEnvironmental Defense Fund and the American Lung Association in California worked with

Tetra Tech33 to model the benefits of implementing the LCFS and C&T. To model the economic

impact of these cutting-edge transportation policies, a theoretical vehicle fleet was con structed

between 2010 and 2025 that assumes no implementation of the LCFS and C&T (the “no-regulation

scenario”). In addition, a scenario representing the effect of implementing the LCFS and C&T was

also developed and run through 2025 (the “deployment scenario”). The difference in emis sions

between the scenarios is calculated as the benefit of the implementation of these two policies.

Establishing a hypothetical no-regulation scenario fleet The no-regulation scenario of the motor vehicle fleet uses projections from the California

Energy Commission (CEC) to model the vehicle fleet through 2025 in the absence of the LCFS

and C&T. The baseline incorporates existing transportation policies in California, including

fuel economy standards and emissions standards as specified in Analysis assumptions (page 7).

Fuel consumption levels and associated greenhouse gas and lifecycle criteria pollutant emis sions

from the fleet mix were estimated using EMFAC 2011 and GREET1.34 Fleet characteristics

associated with the no-regulation scenario are included in Appendix A.

Developing the deployment scenario for modelingThe modeled compliance scenario for the LCFS and C&T program was developed using a litera ture

review of published and unpublished estimates from industry, state and federal government,

academia, and non-profit organizations associated with alternative fuels and vehicle tech nolo gies.

The sources used to model the motor vehicle fleet under LCFS and C&T is detailed in Appendix C.

Vehicle and fuel deployment numbers were compiled into Table 3-1 shown below. These

numbers were then run through an LCFS compliance calculation using carbon intensity values

published by the California Air Resources Board to compare combined penetration levels to

LCFS compliance.

TABLE 3-1

On-road vehicle and fuel use in the deployment scenario35

Fuel type Fuel/vehicle detail Year Deployment scenario

Conventional liquid fossil fuel

Gasoline2020 23,112,152 vehicles

2025 20,715,007 vehicles

Diesel2020 286,610 vehicles

2025 139,750 vehicles

Natural gas

Light-duty sector2020 35,347 vehicles

2025 37,027 vehicles

Heavy-duty sector2020 32,205 vehicles

2025 38,249 vehicles

Hydrogen and electrification (ZEVs)Hydrogen, plug-in hybrid and battery electric

2020 1,074,299 vehicles

2025 1,610,744 vehicles

Biofuels

Ethanol2020 1.74 billion gal/year

2025 2.87 billion gal/year

Biodiesel*2020 326 million gal/year

2025 518 million gal/year

*The biodiesel fleet average blend starts at B5 and increases to B20 by the year 2025.

13Environmental Defense Fund / American Lung Association in California

The reductions of greenhouse gas pollution that result from the modeled vehicle deployment

numbers are shown in Table 3-2. This table then compares these reductions against the carbon

reductions required in the LCFS to determine whether the modeled scenario would achieve

existing regulatory requirements through the year 2020. In essence, Table 3-2 represents a check

of the modeled scenario to ensure modeled deployment figures were sufficiently close to what is

needed pursuant to the LCFS regulation. As shown, the aggregate reductions associated with the

modeled scenario are within 0.5% of required aggregate reductions in the LCFS. Figure 3-1 is a

graphical representation of the values in Table 3-2.

TABLE 3-2

Aggregate GHG reductions achieved by LCFS compliance vs. model deployment scenario

YearLCFS obligation

(aggregate million metric tons reduced)Model compliance scenario

(aggregate million metric tons reduced)

2010 0 0.36

2011 0.51 1.60

2012 1.49 3.78

2013 3.83 6.95

2014 6.17* 11.18

2015 8.51* 16.57

2016 15.19 23.66

2017 24.25 32.52

2018 35.72 43.16

2019 49.59 55.62

2020 66.53 69.93

*Assumes LCFS stringency remains the same for 2013, 2014 and 2015

FIGURE 3-1

Aggregate GHG reductions achieved by LCFS compliance vs. modeled deployment scenario

0

10

20

30

40

50

60

70

80

20202019201820172016201520142013201220112010

GH

G r

educ

tions

(m

illio

n m

etri

c to

ns C

O2E

)

Modeled compliance scenario with the LCFS and C&TLCFS obligation

14 DRIVING CALIFORNIA FORWARD / Methodology

Metrics used to compare the no-regulation and deployment scenarios

Monetizing societal impacts and benefits

The reduction in societal harm that results from the displacement of gasoline and diesel by

cleaner alternative fuels was modeled in the deployment scenario to calculate the benefits of

reduced emissions and lower petroleum dependence. By finding the difference between the

impact of the no-regulation scenario and that of the deployment scenario, the model calculates

the societal benefit (in dollars) of implementing the combined policies. The benefits to air

quality, energy security, and climate change are monetized using the factors presented in

Appendix B to determine the equivalent economic benefits attributable to the two policies.

The monetization factor for the energy security component was applied only to the imported

fraction of petroleum fuel. For each gallon of petroleum fuel avoided/displaced as a result of

these two policies, it is estimated that imported fuel is reduced by approximately half a gallon.36

Due to this adjustment, the monetization estimate of the energy security component is con-

servative; it is likely that some savings attributed to increased petroleum independence also

come from reducing the number of domestically produced gallons of petroleum fuel in addition

to imports. This is due to the fact that the politics and pricing surround ing domestic fuel and

imported fuel are inextricably intertwined.

The societal impacts measured and the source of data for the associated costs are shown in

Table 3-3 below and also included in Appendix B.

TABLE 3-3

Societal costs and source data

Societal cost measuredSource of societal cost correlation data (correlation data is included in Appendix B)

Public health costs: the impacts of the emissions of air pollutants PM2.5, NOx, and SOx, including cases of mortality; respiratory-related emergency room visits; upper, lower and acute respiratory symptoms; exacerbated asthma attacks; heart attacks; hospitalization from respiratory and cardiovascular illness; and lost work days.37

US EPA, Benefits Per Ton PM2.5 Reduced, Environmental Benefits Mapping and Analysis Program (BENMAP), also see N. Fann, et al., The influence of location, source, and emission type in estimates of the human health benefits of reducing a ton of air pollution, 2 Air Quality, Atmosphere & Health Volume 169 (2009).

Energy security costs: the impact of being dependent on petroleum, including the price and supply vulnerability and the associated security risks.38

40 CFR §§85, 86, and 600, 2017 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions and Corporate Average Fuel Economy Standards, Final Rule (Oct. 15, 2012).

Climate change-related costs (the “social cost of carbon”): the impacts of climate change on agricultural businesses, human health, property, ecosystem services, and more.39,40

Interagency Working Group on the Social Cost of Carbon (includes the Council of Economic Advisors, the Departments of Agriculture, Energy, Commerce, Transportation and the Treasury, the Environmental Protection Agency, the Office of Management and Budget and several other agencies), Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis under Executive Order No. 12,866 (Nov. 2013).

Model results and analysis

16 DRIVING CALIFORNIA FORWARD / Model results and analysis

No-regulation scenario: societal costs of California’s transportation system without the LCFS and C&TUsing the GREET and modified EMFAC models, societal economic costs associated with

health impacts from modeled pollutants (NOx, SOx, and PM2.5), energy security impacts from

petroleum demand, and social costs associated with climate change were modeled in a scenario

lacking both the LCFS and C&T policies. Annual as well as cumulative costs were calculated for

the time frame between 2010 and 2025.

As shown in Figure 4-1, in 2020, the total cost (for all years between 2010 and 2020, inclusive)

associated with the fleet in a no-regulation scenario is approximately $274 billion. By 2025, the

cumulative economic impact grows to approximately $387 billion. Figure 4-2 shows how the

FIGURE 4-1

Cumulative societal economic costs from transportation system without the LCFS and C&T

So

ciet

al e

cono

mic

co

st (

$ b

illio

ns)

450

400

350

300

250

200

150

100

50

02010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

� Petroleum dependency (energy insecurity) cost � SOx pollution cost� PM2.5 pollution cost� NOx pollution cost� GHG emission (social cost of carbon) cost

FIGURE 4-2

Annual societal economic cost of transportation system without the LCFS and C&T

0

2

4

6

8

10

12

14

16

18

Soc

ieta

l eco

omic

cos

t ($

bill

ions

)

� 2010� 2015� 2020� 2025

Public health Petroleum dependency Social cost of carbon

17Environmental Defense Fund / American Lung Association in California

annual cost associated with each contributing factor (public health, petroleum dependency,

or climate change) varies from 2010 to 2025. Over time, the public health and petroleum

dependency costs are expected to decrease, while the climate change “social cost of carbon”

is expected to increase slightly. When the three factors are compared against one another, it

is clear that the public health costs are the biggest contributor to overall societal costs from

the transportation sector without the implementation of the LCFS or C&T policies until the

year 2020. In 2025, the annual climate change effects become more costly than the public

health costs.

Deployment scenario results: the benefits of the transition to a cleaner transportation fuel system through implementation of the LCFS and C&T Cleaning up California’s transportation system with diversified and lower carbon sources of

energy will provide an economic benefit by addressing challenges associated with air pollution,

energy dependence, and climate change. Based on results from the modeled compliance

scenario, implementation of California’s LCFS and C&T will result in the necessary transition

to a cleaner fuel mix that is estimated to produce economic benefits, as shown below in

Figure 4-3.

Benefits from the LCFS and C&T deployment scenario can be reported as a cumulative

benefit that accrues across all model years (see Figure 4-4, page 18) or as an annual benefit

(see Figure 4-5, page 18). While a cumulative benefit assessment can provide great insight into

the societal economic benefits over time through increasing deployment of alterna tive fuels

and vehicles, the annual benefit is also relevant.

According to the annual numbers shown in Figure 4-5, the year-over-year benefit of the

LCFS and C&T implementation increases over time as expanded vehicle and fuel deployment

occur throughout the California transportation system. The modeled benefits of the vehicle and

FIGURE 4-3

Benefit of implementing the LCFS and C&T transportation fuel policies between 2010 and 2025Overall public health and societal economic benefits

Air pollution and public health Reductions of PM2.5, NOx, and SOx impacts will clean up California’s air and reduce harm to Californians. This can save $6.0 billion from PM2.5 and $2.3 billion from NOx and SOx.

Energy security Reducing California’s reliance on imported energy and insulating the state from energy price fluctuations can save up to $6.9 billion, while also reducing gasoline and diesel consumption by 33.1 billion gallons between 2010 and 2025.

Climate change Cutting climate change pollution will reduce the social cost of carbon by a cumulative $7.9 billion between 2010–-2025.

Cumulative benefit through 2020: $10.4 billion

Cumulative benefit through 2025: $23.1 billion

18 DRIVING CALIFORNIA FORWARD / Model results and analysis

fuel transition stemming from LCFS and C&T are expected to reach $1.9 and $3.0 billion

annually in 2020 and 2025, respectively. These benefits are a result of a combination of better

health outcomes due to reduced pollution, improved energy security achieved through

a diversified fuel mix, and avoided negative impacts of climate change. The cumulative

benefits of these policies reach up to $10.4 and $23.1 billion by 2020 and 2025, respectively

(see Figure 4-4).

These results show that, although existing California fuel and vehicle policies (excluding the

LCFS and C&T) are contributing to long-term improvements in the transportation system, the

FIGURE 4-4

Cumulative societal economic benefits from the implementation of the LCFS and C&T

So

ciet

al e

con

om

ic b

enef

it (

$ b

illio

ns)

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

� Petroleum dependency (energy insecurity) reduction� SOx pollution reduction� PM2.5 pollution reduction� NOx pollution reduction� GHG emission (social cost of carbon) reduction

25

20

15

10

5

0

FIGURE 4-5

Annual societal economic benefits from the implementation of the LCFS and C&T

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2025202420232022202120202019201820172016201520142013201220112010

So

ciet

al e

cono

mic

ben

efit

($ b

illio

ns)

0.13

0.83

1.94

2.97

19Environmental Defense Fund / American Lung Association in California

LCFS and C&T, when fully implemented, will have significant additional benefits on top of

those. These policies will result in even broader and deeper reductions of air pollution (PM2.5,

NOx, and SOx), petroleum use, and climate change pollution (lifecycle greenhouse gases).

Accord ingly, the LCFS and C&T programs will expedite fleet improvements and speed the

improvement of air quality.

Air pollution and public health benefits assessmentTransitioning to a cleaner and more efficient vehicle and fuel mix will result in reduced

combustion of fossil fuels throughout California. This transition will necessarily result in

reduced pollution in communities and air basins where those fuels would otherwise be

combusted. One example of how the societal economic benefits are achieved from these

reduced emissions can be seen in the causal chain shown in Figure 4-6.

The AB 32 LCFS and

C&T programs will

expedite fleet

improvements and

speed the trajectory

toward cleaner air.

TABLE 4-2

Societal economic benefit of the LCFS and C&T by 2020 and 2025

Benefit typeTotal societal benefit (billions)

2010–2020Total societal benefit (billions)

2010–2025

Overall societal economic benefit $10.4 $23.1

Avoided health impact(PM2.5, NOx, SOx)

$4.3 $8.3

Avoided energy security impact (petroleum dependence)

$3.0 $6.9

Avoided climate change impact (GHG)

$3.1 $7.9

FIGURE 4-6

Causal chain of the transition to cleaner fuels and vehicles yielding lower societal costs

Combustion of gasoline and diesel in cars and trucks results in PM2.5, NOx, and ozone pollution.

Cleaner fuels displace gasoline and diesel and do not result in as much PM2.5 or ozone pollution. As a result, the overall vehicle fleet on the road emits less pollution.

Concentrations of air pollutant near major transportation corridors decrease, meaning families living in communities near those corridors are exposed to lower levels of pollution and do not suffer from as many respiratory ailments.

Personal and taxpayer healthcare costs for family hospital care and doctors’ office visits go down, and parents do not miss as much work caring for sick children or dealing with personal ailments. As a result, the workforce becomes more productive and more profitable.

As a result of fuel policies, societal economic costs go down with the transition to cleaner fuels and more efficient vehicles.

20 DRIVING CALIFORNIA FORWARD / Model results and analysis

Using the deployment scenario for the LCFS and C&T (see Section 3.1b), the GREET

and EMFAC models discussed in Assessment of the “no-regulation scenario” (page 8),

were applied for the years 2010 through 2025. Results of this modeling for decreased

air pollution from the transportation sector due to LCFS and C&T are displayed in

Table 4-3 above.

As a result of LCFS and C&T implementation, the transition in the vehicle and fuel mix

will result in significant improvements in public health. The modeled benefits are displayed

in Table 4-4 above.

Energy security benefits assessment associated with petroleum demand42

California’s LCFS and C&T implementation reduce gasoline and diesel consumption—resulting

in increased energy security for the state. The consumption of fossil fuel (gasoline and diesel) in

California in the no-regulation scenario and the LCFS and C&T implementation scenario is

displayed in Figure 4-7 (page 21).

By facilitating the transition away from a dependence on oil and greatly reducing the

money that the state spends on imported energy, the LCFS and C&T can result in a significant

increase in energy security. As shown in Figure 4-8 (page 21), by 2025, the decreased petroleum

dependency resulting from LCFS and C&T can result in a cumulative avoided cost of nearly

$6.9 billion.

TABLE 4-3

Modeled NOx, SOx, and PM2.5 emissions reductions from LCFS and C&T implementation

PollutantTotal emissions avoided (tons)

2010–2020Total emission avoided (tons)

2010–2025

NOx 106,664 166,940

PM2.5 4,767 9,037

SOx 2,038 3,849

TABLE 4-4

Modeled health benefits of LCFS and C&T implementation41

(also included in Appendix E)

Modeled impacts

Total health benefit (number of cases)

2010-2020

Total health benefit (number of cases)

2010-2025

Avoided premature deaths 470 882

Avoided cases of upper and lower respiratory symptoms

14,415 26,759

Avoided cases of acute respiratory symptoms

238,675 439,629

Avoided cases of acute bronchitis 464 861

Avoided asthma attacks 20,645 38,321

Avoided hospitalizations (cardiac and respiratory related)

338 643

Avoided heart attacks 311 597

Avoided lost work days 40,316 74,339

21Environmental Defense Fund / American Lung Association in California

Climate change benefits assessment and the social cost of carbonThe transition to lower carbon fuels modeled in this scenario leads to reduced levels of

greenhouse gas emissions on a well-to-wheel (WTW) basis—in other words, a reduction in

harmful pollutants from the set of operations that includes the lifecycle of the fuel (i.e. feedstock

extraction, processing/refining, distribution, fuel consumption, vehicle refueling, and fuel

evaporation). The difference in emissions of the no-regulation scenario versus the deployment

scenario is shown in Figure 4-9 (page 22).

When determining emissions reductions, it is necessary to look at the entire WTW lifecycle.

Focusing exclusively on tailpipe emissions captures only part of the story—for instance, while

FIGURE 4-7

California gasoline and diesel consumption in no-regulation scenario vs. deployment scenario

10

12

14

16

18

20

22

2025202020152010

Pet

role

um f

uel c

ons

ump

tion

(bill

ion

gal

lons

)

20.5 20.3

19.2

18.1 17.9

15.1

16.7

12.3

� No regulation scenario� Deployment scenario with LCFS and C&T

FIGURE 4-8

Economic benefits of LCFS and C&T implementation resulting from decreased petroleum dependency

0

1

2

3

4

5

6

7

8

2025202420232022202120202019201820172016201520142013201220112010

Eco

nom

ic b

enef

it ($

bill

ions

)

Cumulative savingsAnnual savings

$0.0

$0.8

$0.2

$3.0

$6.9

$0.9$0.6

22 DRIVING CALIFORNIA FORWARD / Model results and analysis

electric vehicles might lead to fewer emissions on the road, production of electricity via fossil

fuels can partially offset such a benefit. Thus, the reductions and subsequent benefits shown

are only significant to the extent that they look at the full picture, and not just at a piece of

the puzzle.

A reduction in harmful greenhouse gas emissions that contribute to climate change will

result in fewer adverse health impacts, such as certain types of cancer, respiratory ailments,

and cardiovascular disease. As explained in the health benefits analysis in Air pollution and

public health benefits assessment (page 19), this results in avoided costs related to missed

FIGURE 4-9

Climate pollution reductions from implementation of the LCFS and C&T

140

150

160

170

180

190

200

210

220

2025202020152010

WTW

GH

G e

mis

sio

ns (

mill

ion

met

ric

tons

CO

2E) 215 214

204

191

179

� No regulation scenario� Deployment scenario with the LCFS and C&T

198

177

157

FIGURE 4-10

Economic benefits of LCFS and C&T implementation resulting from decreased carbon pollution (social cost of carbon)

0

1

2

3

4

5

6

7

8

9

2025202420232022202120202019201820172016201520142013201220112010

Eco

nom

ic b

enef

it ($

bill

ions

)

Cumulative savingsAnnual savings

$0.0 $0.2

$3.1

$7.9

$1.2$0.6 $0.7

23Environmental Defense Fund / American Lung Association in California

work days and hospital visits. The reductions in greenhouse gas emissions will also prevent

costs of up to $1.2 billion annually by 2025, amounting to cumulative savings of $7.9 billion,

as shown in Figure 4-10 (page 22). These savings were calculated by applying published climate

change-related cost multipliers (the “social cost of carbon”) to the projected amount of avoided

greenhouse gas emissions, providing an estimate of the economic benefit of reducing climate

pollution from the LCFS and C&T. The modeling in this report uses the most recent social

cost of carbon estimated by the 2013 Interagency Working Group on the Social Cost of Carbon.

A recent study showed that this estimate is actually too low due to many omitted climate

change impacts.43 Thus, this climate change benefits assessment is conservative and the

positive impact of the LCFS and C&T is likely greater than presented here.

ConclusionMoving California’s vehicle fleet forwardCalifornia’s innovative clean transportation policies are putting communities on a path

to save billions of dollars in avoided costs of pollution, climate change, and energy insecurity

each year. As the LCFS and C&T policies move forward, California will see significant economic

benefit, and this suite of transportation fuels policies will pay dividends for years to come.

The transition to cleaner fuels and a more diverse vehicle fleet will result in cleaner air

and better health for Californians, increased energy security, and mitigation of climate change

impacts. A monetization of these avoided consequences—measured in terms of fewer missed

work days and hospital visits, reduced detriment to key economic sectors, and reduced energy

insecurity—show that in addition to direct benefits, implementation of the LCFS and C&T will

save the state billions of dollars.

This report demonstrates how advantageous these policies can be for the people across the

state. By leading the nation in addressing climate change, California is improving the health of

its citizens and the economy.

By leading the nation

in addressing climate

change, California is

benefitting the health

of its citizens and the

economy.

Appendices

26 DRIVING CALIFORNIA FORWARD / Appendices

APPENDIX A

No-regulation scenario input for model

The theoretical no-regulation scenario (without LCFS and C&T) fleet of conventional gasoline

and diesel vehicles is characterized by:

• Light-duty vehicle (LDV) and heavy-duty vehicle (HDV) populations, as projected by the

California Energy Commission (CEC) 2011 Transportation Energy Forecasts and Analysis for

the 2011 Integrated Energy Policy Report (IEPR).

• LDV and HDV upstream “well-to-tank” greenhouse gas (GHG) and criteria pollutant emissions,

using emission factors from GREET1 2012.

• LDV and HDV tailpipe “tank-to-wheels” GHG and criteria pollutant emissions, using emission

factors from EMFAC2011 and the current California Air Resources Board (CARB) Greenhouse

Gas Inventory – 2020 Emissions Forecast for Transportation.44

• LDV and HDV petroleum consumption based on EMFAC2011 and included the national Clean

Car regulation for new light duty vehicles to model year 2025 (assumed 3% GHG reduction

scenario via Pathway B which represents an approach where advanced gasoline vehicles and

mass reduction are utilized).

The California fleet of vehicles is allocated into the LDV and HDV categories by weight class,

with lighter vehicles that generally operate on gasoline placed into the LDV category and heavier

vehicles that generally operate on diesel placed into the HDV category. From this allocation of

vehicles into either the LDV or HDV category, the analysis examines the average characteristics

of that category, weighted by vehicle population and including annual mileage, fuel economy,

and emissions.

27Environmental Defense Fund / American Lung Association in California

APPENDIX B

Societal impact monetization factorsSocietal impact Monetized value (2013$) Source

Air quality:

NOx $9,919/ton in 2010 to $14,687/ton in 2025

Communication with Neal Fann, U.S. Environmental Protection Agency (EPA) Office of Air Quality Planning & Standards, Air Benefit and Cost Group. July 2013. (Using the updated model that also produced the benefits per ton results for EPA’s Environmental Benefits Mapping and Analysis Program website: http://www.epa.gov/oaqps001/benmap/bpt.html)

PM2.5 $506,094/ton in 2010 to $734,831/ton in 2025 Communication with Neal Fann, EPA. July 2013.

SOx $33,770/ton in 2010 to $40,440/ton in 2025 Communication with Neal Fann, EPA. July 2013.

Climate change

GHG$36/metric ton in 2010 to $53/metric ton in 202545

U.S. Government. “Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866.” Interagency Working Group on Social Cost of Carbon, United States Government. November 2013.

Petroleum dependency:

Macroeconomic disruption and monopsony

$0.415/gal in 2010 to $0.488/gal in 2025

U.S. Federal Register, Volume 77, No. 199, [40 CFR Parts 85, 86, and 600]. “2017 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions and Corporate Average Fuel Economy Standards, Final Rule.” October 15, 2012.

28 DRIVING CALIFORNIA FORWARD / Appendices

APPENDIX C

Sources for alternative fuel vehicle population and fuel consumption projectionsProjection Sources

BEV (LDV and HDV)

California Energy Commission. “California Energy Demand 2012-2022 Final Forecast, Volume 1: Statewide Electricity Demand and Methods, End-User Natural Gas Demand, and Energy Efficiency.” CEC-200-2012-001. June 2012.

California Energy Commission. “Transportation Energy Forecasts and Analyses for the 2011 Integrated Energy Policy Report.” CEC-600-2011-007-SD. August 2011.

TIAX LLC. “California Low Carbon Fuel Standard (LCFS) Electric Pathway—On-Road and Off-Road.” Presentation to California Electric Transportation Coalition. http://www.caletc.com/wp-content/uploads/2012/12/TIAX_CalETC _LCFS_Electricity_Potential_FINAL.pdf. November 14, 2012.

Governor’s Interagency Working Group on Zero-emission Vehicles, “2013 ZEV Action Plan: A roadmap toward 1.5 million zero-emission vehicles on California roadways by 2025.” http://opr.ca.gov/docs/Governor’s _Office_ZEV_Action_Plan_(02-13).pdf. February 2013.

BEV and PHEV

Olson, T. “New Motor Vehicle Board 9th Industry Roundtable.” http://www .slideserve.com/sharona/new-motor-vehicle-board-9th-industry-roundtable -sacramento-california. March 21, 2012.

Pike Research. “Electric Vehicle Geographic Forecasts.” http://www .pikeresearch.com/research/electric-vehicle-geographic-forecasts. Accessed July 29, 2013.

Shackelford, J, A. Chase, M. McGaraghan, S. Tartaglia. “Reducing Barriers to Electric Vehicle Adoption through Building Codes.” http://www.aceee.org/files/proceedings/2012/data/papers/0193-000012.pdf. 2012.

Biodiesel (HDV)

California Energy Commission. “Transportation Energy Forecasts and Analyses for the 2011 Integrated Energy Policy Report.” CEC-600-2011-007-SD. August 2011.

California Energy Commission, “2013 Integrated Energy Policy Report.” CEC-100-2013-001-CMF. http://energy.ca.gov/2013publications/ CEC-100-2013-001/CEC-100-2013-001-CMF.pdf. 2013.

Ethanol

California Air Resources Board. “Proposed Regulation to Implement the Low Carbon Fuel Standard, Volume I, Staff Report: Initial Statement of Reasons.” March 5, 2009.

California Energy Commission. “Transportation Energy Forecasts and Analyses for the 2011 Integrated Energy Policy Report.” CEC-600-2011-007-SD. August 2011.

Jackson, M. “AB 1007 Workshop: Ethanol Implementation Scenarios.” http://www.energy.ca.gov/ab1007/documents/2007-05-31_joint_workshop/ 2007-05-31_ETHANOL_IMPLEMENTATION_SCENARIO.PDF. May 31, 2007.

Lin, C.-Y. C., W. Zhang, O. Rouhani, L. Prince. “The Implications of an E10 Ethanol-Blend Policy for California.” Agricultural and Resource Economics Update 13(2). November/December 2009.

Olson, T. “New Motor Vehicle Board 9th Industry Roundtable.” http://www .slideserve.com/sharona/new-motor-vehicle-board-9th-industry-roundtable -sacramento-california. March 21, 2012.

29Environmental Defense Fund / American Lung Association in California

Hydrogen (LDV)

California Air Resources Board. “Advanced Clean Cars Summary.” http://www.arb.ca.gov/msprog/clean_cars/acc%20summary-final.pdf. Accessed July 29, 2013.

California Energy Commission. “2011-12 Investment Plan for the Alternative and Renewable Fuel and Vehicle Technology Program.” CEC-600-2011-006-SD. February 2011.

Hooks, M., M. Jackson. “AB 1007 Scenarios: Hydrogen Fuel Cell Vehicles.” http://www.energy.ca.gov/ab1007/documents/2007-05-31_joint_workshop/ 2007-05-31_HYDROGEN_FUEL_CELL_SCENARIO.PDF. May 24, 2007.

NGV (HDV)

Law, K., M. Chan. “South Coast Air Basin Natural Gas Vehicle Roadmap.” Prepared by Tetra Tech for Southern California Gas Company. July 2013.

National Petroleum Council. “Advancing Technology for America’s Transporta-tion Future: Heavy-Duty Vehicles.” http://www.npc.org/FTF-80112.html. August 1, 2012.

Olson, T. “New Motor Vehicle Board 9th Industry Roundtable.” http://www .slideserve.com/sharona/new-motor-vehicle-board-9th-industry-roundtable -sacramento-california. March 21, 2012.

NGV (LDV)

California Energy Commission. “California Energy Demand 2012-2022 Final Forecast, Volume 1: Statewide Electricity Demand and Methods, End-User Natural Gas Demand, and Energy Efficiency.” CEC-200-2012-001. June 2012

Green Car Congress. “Navigant Forecasts Global Natural Gas Fleet of 34.9M by 2020.” http://www.greencarcongress.com/2013/06/navigant-forecasts-global -natural-gas-fleet-of-349m-by-2020.html. Accessed July 29, 2013.

California Energy Commission. “Transportation Energy Forecasts and Analyses for the 2011 Integrated Energy Policy Report.” CEC-600-2011-007-SD. August 2011.

PHEV (HDV)California Energy Commission. “Option 2K: Heavy Duty Hybrid Electric Vehicles.” CEC-600-2005-024-AD-2K. 2005.

PHEV (LDV)

California Energy Commission. “California Energy Demand 2012-2022 Final Forecast, Volume 1: Statewide Electricity Demand and Methods, End-User Natural Gas Demand, and Energy Efficiency.” CEC-200-2012-001. June 2012.

McCarthy, R., C. Yang. “Description of Alternative Fuel Penetration Scenarios (Draft).” Institute of Transportation Studies, UC Davis. Accessed July 29, 2013.

PHEV (LDV and HDV)

California Air Resources Board. “Advanced Clean Cars Summary.” http://www .arb.ca.gov/msprog/clean_cars/acc%20summary-final.pdf. Accessed July 29, 2013.

TIAX LLC. “California Low Carbon Fuel Standard (LCFS) Electric Pathway—On-Road and Off-Road.” Presentation to California Electric Transportation Coalition. http://www.caletc.com/wp-content/uploads/2012/12/TIAX _CalETC_LCFS_Electricity_Potential_FINAL.pdf. November 14, 2012.

30 DRIVING CALIFORNIA FORWARD / Appendices

APPENDIX D

Model results: range of economic benefits ($ billions)

Model results

2010–2020 2010–2025

No-regulation scenario cost

Deployment scenario cost (with LCFS and C&T compliance)

Total societal economic benefit

No-regulation scenario cost

Deployment scenario cost (with LCFS and C&T compliance)

Total societal economic benefit

Overall societal economic impact

$274.2 $263.8 $10.4 $386.8 $363.7 $23.1

Health impact (PM2.5, NOx, SOx)

$140.0 $135.6 $4.32 $188.2 $179.9 $8.28

Climate change impact (CO2)

$93.2 $90.1 $3.11 $139.5 $131.6 $7.90

Energy security impact (petroleum dependence)

$41.1 $38.1 $3.01 $59.1 $52.1 $6.95

31Environmental Defense Fund / American Lung Association in California

APPENDIX E

Model results: range of health benefits (number of cases)

Model resultsDescription of health impact

2010-2020 2010-2025

No-regulation scenario cases (thousands)

Cases with LCFS and C&T compliance (thousands)

Total health benefit (avoided cases)

No-regulation scenario cases (thousands)

Cases with LCFS and C&T compliance (thousands)

Total health benefit (avoided cases)

Mortality Premature death 15.4 14.9 470 20.4 19.6 882

Acute respiratory symptoms

Respiratory irritation (including lungs, nose, and throat) that is isolated and responds to treatment

7,854.1 7,615.4 238,675 10,318.6 9,878.9 439,629

Upper and lower respiratory symptoms

Chronic respiratory irritation, demanding a long-term and systematic approach to treatment

476.2 461.9 14,415 627.8 601.1 26,759

Acute bronchitis

Tubes carrying air to the lungs are inflamed and irritated; effects are usually relatively short-term and treatable

15.3 14.9 464 20.2 19.3 861

Asthma exacerbation

Worsening of asthma, a chronic illness that inflames and narrows the airways, making breathing difficult

666.4 645.8 20,645 878.4 840.1 38,321

Hospitalizations (cardiac and respiratory)

Admission to a healthcare facility for treatment of severe symptoms

11.0 10.7 340 14.7 14.1 643

Heart attack

A blockage of the artery that restricts blood flow and causes permanent damage to the heart muscle

10.0 9.7 311 13.5 12.9 597

Work loss days

Inability to work due to severity of the above illnesses

1,327.4 1,287.2 40,316 1,744.7 1,670.4 74,339

DRIVING CALIFORNIA FORWARD / Notes32

Notes 1 California Air Resources Board, Estimate of Premature

Deaths Associated with Fine Particle Pollution (PM2.5) in California Using a U.S. Environmental Protection Agency Methodology (Aug. 31, 2010), http://www.arb.ca.gov/research/health/pm-mort/pm-report_2010.pdf.

2 F. Caiazzo, et al., Air Pollution and Early Deaths in the United States, Part 1: Quantifying the impact of major sectors in 2005(2013), 79 Atmospheric Environment 198, http://lae.mit.edu/wordpress2/wp-content/uploads/2013/ 08/US-air-pollution-paper.pdf.

3 American Lung Association in California, The Road to Clean Air: Public Health and Global Warming Benefits of Advanced Clean Car Standards (2011), http://www.lung .org/associations/states/california/assets/pdfs/advocacy/clean-cars-campaign/the-road-to-clean-air.pdf.

4 American Lung Association. A Penny for Prevention: The Case for Cleaner Gasoline and Vehicles (2013), http://www.lung.org/healthy-air/outdoor/defending-the -clean-air-act/interactive-presentations/cleaner-gasoline -and-vehicles-report-2013.pdf.

5 California Energy Commission, 2010–2011 Investment Plan for the Alternative and Renewable Fuel and Vehicle Technology Program (Jul. 2010), CEC-600-2010-001-CTD, http://www.energy.ca.gov/2010publications/ CEC-600-2010-001/CEC-600-2010-001-CTD.PDF.

6 D. Greene, Low Carbon Transportation: A Crucial Link to Economic and Energy Security (Sep. 2012), http://www .arb.ca.gov/research/lectures/speakers/greene/greene.pdf.

7 See note 3

8 See note 3

9 California Department of Motor Vehicles, Employee and Office Statistics (2011), http://dmv.ca.gov/about/profile/official.pdf; see also U.S. Energy Information Agency, Transportation Sector Energy Consumption Estimates (2011), http://www.eia.gov/state/seds/sep_sum/html/pdf/sum_btu_tra.pdf.

10 American Lung Association, State of the Air 2014: Statewide Summary (2014), http://www.lung.org/associations/states/california/assets/pdfs/sota-2014/sota-2014_statewide-fact.pdf, see also California Air Resources Board, California Air Resources Approves Advanced Clean Car Rules (Jan. 2012), http://www.arb .ca.gov/newsrel/newsrelease.php?id=282.

11 See note 9, also see California Air Resources Board, Facts About California Clean Vehicle Incentives (Feb. 2012), http://www.arb.ca.gov/msprog/zevprog/factsheets/clean_vehicle_incentives.pdf.

12 U.S. Environmental Protection Agency, California 8-hour Ozone Nonattainment Areas (2008 Standard) (Dec. 2013), http://www.epa.gov/airquality/greenbook/map/ca8_2008 .pdf.

13 California Office of Environmental and Health Hazard Assessment, Indicators Of Climate Change In California: Environmental Justice Impacts (Dec. 2010), http://oehha .ca.gov/multimedia/epic/pdf/ClimateChangeEJ123110.pdf.

14 J.M. Melillo, et al., Climate Change Impacts in the United States: The Third National Climate Assessment, U.S. Global Change Research Program (2014), http://www .globalchange.gov/ncadac.

15 California Energy Commission, Energy Almanac: Oil Supply Sources to California Refineries (last modified Apr. 2014), http://energyalmanac.ca.gov/petroleum/statistics/crude_oil_receipts.html.

16 See note 9; American Lung Association, A Penny for Prevention: The Case for Cleaner Gasoline and Vehicle Standards (2013), http://www.lung.org/healthy-air/outdoor/defending-the-clean-air-act/interactive -presentations/cleaner-gasoline-and-vehicles-report -2013.pdf; see also Health Effects Institute, Traffic-Related Air Pollution: A Critical Review of the Literature on Emissions, Exposure, and Health Effects (2010), http://pubs.healtheffects.org/getfile.php?u=553; see also U.S. Environmental Protection Agency, Sulfur dioxide: Health (2013), http://www.epa.gov/oaqps001/sulfurdioxide/health.html.

17 California Air Resources Board. California Greenhouse Gas Emission Inventory: 2000–2012 (May 2014), http://www.arb.ca.gov/cc/inventory/pubs/reports/ ghg_inventory_00-12_report.pdf.

18 California Energy Commission, Energy Almanac: Foreign Sources of Crude Oil Imports to California 2012 (last modified Apr. 2013), http://energyalmanac.ca.gov/petroleum/statistics/2012_foreign_crude_sources.html.

19 California Energy Commission, California Energy Demand 2012–2022 Final Forecast, Volume 1: Statewide Electricity Demand and Methods, End-User Natural Gas Demand, and Energy Efficiency (June 2012), CEC-200-2012-001-CMF-VI, http://www.energy.ca.gov/ 2012publications/CEC-200-2012-001/CEC-200-2012-001 -CMF-V1.pdf.

20 National Petroleum Council, NPC Future Transportation Fuels Study: Advancing Technology for America’s Transportation Future, Chapter Three: Heavy-Duty Vehicles (Aug. 1, 2012), http://www.npc.org/FTF-80112 .html.

21 C.-Y. Lin, et al., The Implications of an E10 Ethanol-Blend Policy for California, 13 Agricultural and Resources Economics(Nov./Dec. 2009), http://giannini.ucop.edu/media/are-update/files/articles/v13n2_1.pdf.

22 ICF International, California’s Low Carbon Fuel Standard: Compliance Outlook for 2020(June 2013), https://www .ceres.org/resources/reports/california2019s-low-carbon -fuel-standard-compliance-outlook-for-2020.

33Environmental Defense Fund / American Lung Association in California

23 J. Shakelford, et al Reducing Barriers to Electric Vehicle Adoption through Building Codes, http://www.aceee.org/files/proceedings/2012/data/papers/0193-000012.pdf.

24 B. Spiller, et al., California Policy Briefing Memo – Motor Vehicle Fuel Diversification(Jul. 2013), Environmental Defense Fund, http://www.edf.org/sites/default/files/sites/default/files/content/Fuels%20Diversification%20Memo %20July%2016%20-%20FINAL.pdf.

25 California Air Resources Board, Proposed First Update to the Climate Change Scoping Plan: Building on the Framework (Feb. 2014), http://www.arb.ca.gov/cc/ scopingplan/2013_update/draft_proposed_first_update .pdf, see also California Legislative Information, SB-1125 California Global Warming Solutions Act of 2006: emissions reduction (Mar. 28, 2014), http://leginfo .legislature.ca.gov/faces/billNavClient.xhtml?bill_id =201320140SB1125.

26 EMFAC is California’s tool for estimating emissions from on-road vehicles operating in California and is built on decades of vehicle testing and analysis informed by Department of Motor Vehicle registration data, the Smog Check program, and many other data sources. However, since the EMFAC 2011 update includes the impacts of the LCFS alongside recently adopted diesel regulations including the Truck and Bus Rule, diesel truck fleet rules, the Pavley Clean Car Standard, the EMFAC model used was modified to remove the impact of the LCFS.

27 California Air Resources Board, Mobile Source Emission Inventory—Current Methods and Data(last modified Jan. 2013), http://www.arb.ca.gov/msei/modeling.htm.

28 California Air Resources Board, Low Carbon Fuel Standard Program (last modified Mar. 2014), http://www .arb.ca.gov/fuels/lcfs/lcfs.htm.

29 California Air Resources Board, The California LCFS: EPA Workshop (June 2009), http://www.arb.ca.gov/fuels/lcfs/epa%2009-0610%20mlw%202%20for%20web.pdf.

30 Environmental Defense Fund, California’s LCFS: Low Carbon Fuel Standard (Mar. 2013), http://www.edf.org/sites/default/files/LCFS_fact_sheet_March_8_2013.pdf.

31 S. Yeh and J. Witcover, Status Review of California’s Low Carbon Fuel Standard (Jan. 2014), Institute of Transportation Studies, http://www.its.ucdavis.edu/research/publications/publication-detail/?pub_id=2008.

32 California Air Resources Board, Semi-Annual Report to the Joint Legislative Budget Committee on Assembly Bill 32: The California Global Warming Solutions Act of 2006 (Jul. 2013), http://www.arb.ca.gov/cc/jlbcreports/july2013jlbcreport.pdf.

33 Tetra Tech is a leading environmental engineering and consulting firm. See http://www.tetratech.com.

34 California Air Resources Board, Mobile Source Emission Inventory —Current Methods and Data, (last modified Jan. 2013), http://www.arb.ca.gov/msei/modeling.htm; see also Argonne National Laboratory, GREET Model: The Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation Model, http://greet.es.anl.gov/.

35 It is impossible to predict the future with perfect accuracy. This analysis does not claim to do that. Instead, this report offers projected values for fleet deployment based on a careful assessment of long-term state goals and vehicle deployment patterns drawn from the literature. The results capture the clear trend toward increased diversification of the vehicle fleet in California driven by the innovative policies the state has in place.

36 U.S. Federal Register, Volume 77, No. 199, [40 CFR Parts 85, 86, and 600], 2017 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions and Corporate Average Fuel Economy Standards, Final Rule (Oct. 15, 2012).

37 These health outcomes are quantified by using the PM2.5 emissions projections and using monetization factors developed by the EPA.

38 The petroleum dependency metric quantifies the impact of macroeconomic disruption and monopsony.

39 The metric includes changes in human health, agricultural productivity, property damages and other costs associ-ated with climate change. The metric is widely used by the federal government. See U.S. Environmental Protection Agency, The Social Cost of Carbon (last modi fied Nov. 26, 2013), http://www.epa.gov/climatechange/EPAactivities/economics/scc.html.

40 For more on the effect of climate change on human health through increase in ground-level ozone, see the National Climate Assessment included in note 14.

41 See Appendix E for full table of health scenario outcomes and total benefits.

42 The starting point for the scenarios is different than the diesel consumption in the no-regulation scenario because the vehicle population and fuel consump tion numbers are based upon only the EMFAC model results, which only models gasoline and diesel fuel consumption. In contrast, our scenarios assumed diesel displacement from alternative fuels such as natural gas and biodiesel in 2010, which were subtracted out of diesel levels in the no-regulation scenario. To have the same starting point, the analysis would either have to assume that there were no alternative fuel vehicles in 2010 or modify the EMFAC results to take alternative vehicles into account—resulting in circular logic.

43 Environmental Defense Fund, Institute for Policy Integrity, Natural Resources Defense Council, Omitted Damages: What’s Missing from the Social Cost of Carbon (Mar. 13, 2014), http://costofcarbon.org/files/Omitted_Damages _Whats_Missing_From_the_Social_Cost_of_Carbon.pdf.

44 California Air Resources Board, Greenhouse Gas Inventory—2020 Emissions Forecast (last modified Aug. 2013), http://www.arb.ca.gov/cc/inventory/data/forecast.htm.

45 These numbers reflect a 3% discount rate based on the Interagency Working Group’s (IWG) updated set of social cost of carbon estimates. If anything, this discount rate underestimates the costs of climate change, as explained in the formal set of comments submitted by the Environmental Defense Fund, Institute for Policy Integrity, NRDC, and Union of Concerned Scientists, which can be found here: http://www.ucsusa.org/assets/documents/global_warming/Joint-Comments-to-OMB.pdf. See also note 43.

Environmental Defense Fund edf.org

American Lung Association in California lung.org/california

Tetra Tech tetratech.com